Lead: On Feb. 19, 2026, Bank of America Corp. confirmed it will deploy $25 billion of its own cash into private-credit transactions, marking a significant expansion of the bank’s direct-lending activity. The investments will be originated through the capital-markets arm inside its investment-banking unit, according to people familiar with the plans. The move places Bank of America alongside other Wall Street firms that have used balance-sheet capital to back private loans. Executives see the allocation as an extension of existing lending efforts rather than a separate third-party fund.
Key Takeaways
- Bank of America will commit $25.0 billion of its own capital to private-credit deals, announced Feb. 19, 2026.
- The deals are to be originated by the bank’s capital-markets unit within its investment-banking division, not through external funds.
- The initiative expands the firm’s direct-lending activities and signals greater balance-sheet participation in the private-credit market.
- The move follows a broader industry trend of banks and asset managers increasing direct lending amid strong demand from leveraged borrowers.
- Sources discussing the plan requested anonymity because the details were not yet public at the time of reporting.
- The commitment may shift risk-weighted assets and capital allocation within the bank, with implications for regulatory and investor scrutiny.
Background
Private credit—loans made outside of syndicated bank markets and public bond markets—has grown substantially since the post-2008 restructuring of bank-lending markets. Asset managers and nonbank lenders expanded market share as traditional banks retrenched from some middle-market lending, creating a large and diverse private-credit ecosystem. In recent years, some large financial institutions have begun using parts of their own balance sheets to originate loans directly, aiming to capture higher fees and returns while keeping origination control. Regulators and investors have watched the trend closely because balance-sheet lending concentrates credit and liquidity risk within banks that are subject to capital and liquidity requirements.
Bank of America’s decision fits into this context: it does not represent the creation of a new third-party fund but an internal allocation to a fast-growing lending channel. The bank’s capital-markets team, which traditionally structures and distributes loans and bonds, will be the origination hub for these private-credit transactions. That structure is intended to leverage existing deal flow, client relationships and underwriting resources. Market participants say that such moves can accelerate loan placement but also complicate capital planning and risk-management frameworks.
Main Event
According to people briefed on the plan, Bank of America will deploy $25 billion of its own capital into private-credit investments, building on its current direct-lending footprint. The funding will be sourced from the firm’s balance sheet and managed as part of its investment-banking operations rather than sold as external limited-partnership vehicles. The originations are expected to be produced by the capital-markets group, which will source transactions, underwrite credit, and retain exposures on the bank’s books. The people declined to be identified because the specifics remained private at the time of reporting.
Bank executives have framed the allocation as an extension of ongoing direct-lending activity—effectively increasing the bank’s willingness to hold exposures it might previously have syndicated or sold. That approach aims to capture both origination fees and the spread on held loans, improving returns compared with purely fee-based business. Industry observers note the strategy also raises questions about concentration risk in sectors and borrower types traditionally served by private-credit lenders. How the bank will price, tranche and monitor these loans will determine the economic and risk profile of the program.
The decision mirrors recent actions by other large financial firms that have used balance-sheet capacity to expand private-credit origination, responding to sustained borrower demand and compressed yield in public markets. Execution and governance will be key: underwriting standards, stress-testing, and limits on sector or borrower concentrations will shape outcomes. Bank of America has not provided a public, line-by-line blueprint of the program; the current account of structure and intent is based on people familiar with the bank’s plans.
Analysis & Implications
Deploying $25 billion on balance sheet represents a significant reallocation of capital that could boost reported lending activity and fee income for Bank of America. For investors, the trade-off is between higher expected returns from held private loans and increased balance-sheet earnings volatility if credit conditions deteriorate. Because private loans are often less liquid and carry bespoke covenants, the bank will need robust monitoring and provisioning practices to manage potential credit deterioration.
From a regulatory perspective, balance-sheet private lending can affect risk-weighted assets and capital ratios depending on loan structure and supervisory classification. If a sizable portion of the $25 billion is held as exposures that attract higher risk weights, the bank’s capital planning could be affected. Bank of America will likely model multiple stress scenarios to estimate potential capital consumption and to determine whether the program requires adjustments to capital buffers or dividend/share buyback plans.
Competitively, the move tightens the gap between traditional banks and nonbank private-credit providers. By using its capital-markets platform to originate and retain loans, the bank may offer faster execution or more integrated financing packages than some asset managers. However, asset managers with third-party capital maintain scale and fee-based earnings that a single bank balance sheet cannot fully replicate. Borrowers may benefit from greater liquidity and choice, but heightened competition could also compress loan pricing over time.
Comparison & Data
| Aspect | Bank of America (This move) | Traditional Private-Credit Managers |
|---|---|---|
| Capital source | Bank balance sheet ($25B committed) | Third-party investor capital (LP commitments) |
| Origination | Capital-markets unit within investment banking | Dedicated private-credit teams in asset managers |
| Liquidity | Lower (held loans on balance sheet) | Varies (fund structures can provide gates/term) |
| Return profile | Fee + spread on held loans | Fees + performance-based returns for managers |
The table highlights qualitative differences: Bank of America’s program is distinguished by balance-sheet backing and origination from an investment-banking unit, while traditional private-credit managers rely on pooled investor capital and different liquidity mechanics. These structural contrasts matter for risk allocation, pricing dynamics, and how losses would be absorbed in stressed scenarios.
Reactions & Quotes
Bank of America plans to use its capital-markets division to originate private-credit loans and will retain exposures on its own books, according to people briefed on the initiative.
Bloomberg (news)
Context: This paraphrased account—attributed to Bloomberg reporting—summarizes how the bank intends to source the deals. It emphasizes that the originations are internal and not structured as external third-party funds, which affects ownership of credit risk.
Industry observers say the move aligns with a broader trend of larger financial firms deploying balance-sheet capital to capture higher returns in private lending markets.
Market analysts (industry commentary)
Context: Analysts point out that many large players are adapting strategies to meet borrower demand and to reclaim market share lost to nonbank lenders. Observers caution that retained exposures require heightened governance and capital planning.
Some investors will welcome the prospect of stronger origination pipelines, while others may scrutinize potential increases in balance-sheet risk and capital strain.
Investor community (market reaction)
Context: Market reaction typically splits between those focused on near-term revenue growth and those emphasizing capital efficiency and risk metrics. How management communicates stress testing and risk limits will shape investor confidence.
Unconfirmed
- Whether the $25 billion will be deployed immediately or phased over multiple quarters remains unconfirmed.
- The exact mix of loan types (senior secured, unitranche, mezzanine, or specialty financings) to be held on the balance sheet has not been disclosed.
- Details on expected capital treatment, stress scenarios, or reporting segmentation for these exposures have not been finalized publicly.
Bottom Line
Bank of America’s $25 billion allocation to private-credit deals signals a clear strategic move to increase balance-sheet participation in a high-demand lending market. The program aims to capture origination economics and deepen client relationships by originating loans through the bank’s capital-markets team and retaining exposures rather than packaging them for external investors.
Investors and regulators will watch how the bank manages underwriting standards, concentration limits, and capital impacts as the program expands. The ultimate success of the initiative will depend on disciplined credit selection, transparent governance, and credible stress testing in a market that can tighten quickly if macro conditions deteriorate.
Sources
- Bloomberg (news report summarizing people briefed on the matter)